Apple said to be close to buying Dr Dre's Beats Electronics for US$3.2b
Headphone maker and music streamer Beats said to acquired by Apple in highly-priced move that mystifies technology industry watchers
Technology giant Apple is close to paying a record US$3.2 billion for headphone maker and music streamer Beats Electronics, two people with knowledge of the matter said, in an expensive foray that would mark a departure for the usually cash-conservative iPhone maker.
Both companies are hashing out details and the envisioned deal could still fall through, one person told reporters on condition of anonymity because the discussions were private.
A second source familiar with the matter said Apple was in the market for a subscription-based music service to complement its “iRadio” ad-based offering, launched last year as part of an attempt to jump into a music-streaming arena then split between a handful of startups such as Pandora.
“This is really puzzling. They must have something hidden under the hood.”
Founded by rapper Dr Dre and legendary music producer Jimmy Iovine, Beats Electronics is best known for its ‘Beats by Dr Dre’ line of trendy headphones that vie with the likes of Skullcandy, Sennheiser and Bose. This year, it launched a music service that has won plaudits for its slick design and human music curation, versus the computer-algorithms that determine playlists for most of its rivals.
But analysts on Thursday questioned whether Beats, valued at just US$1 billion during its last funding round in September, was worth the price tag. Apple had more than US$130 billion in cash as of the end of March, but the vast majority of that is located outside the US and investors have called on the company to return more cash in the form of dividends and buybacks.
Apple-watchers have speculated that the company that upended the music industry – and today is the single largest seller of tunes – was contemplating a Spotify-like on-demand music service to go with iRadio service and iTunes.
“This is really puzzling,” said Forrester analyst James McQuivey, who said there was huge overlap between the two companies’ customer base. “You buy companies today to get technologies that no one else, or customers that no one, has.”